History of the Beverly Hills Rent Subsidy

April 1, 2023June 18, 2023 Mark Elliot Helen Morales, Julian Gold, Lili Bosse, qualified tenant subsidy

Beverly Hills approved a $1M rent subsidy to tenants in the first year of the pandemic to provide up to $1,000 per month for a maximum of three months to an eligible rent-stabilized household. Restrictions on eligibility meant that only one hundred households saw rent relief. Council then proposed a second round subsidy to disburse the balance of program funds but could not come to agreement on a framework for the subsidy or eligibility criteria. That was nearly a year ago and in the meanwhile tenants have asked, What happened to the rent subsidy? We went back in time to document exactly where this program went off the rails.

Background to the Housing Assistance Subsidy

The original purpose of the city subsidy was to provide support to precariously-housed rent-stabilized tenants by defraying some part of the annual rent increase. The notion of using city money to offset rent increases was introduced by then-councilmember Robert Wunderlich in 2018 during council rent stabilization study sessions.

The need for housing assistance is well-documented. At the October 2018 rent stabilization study session, councilmembers were presented with census data that shows more than half of renting households in Beverly Hills are ‘rent burdened.’ Rent burden is a federal measure of housing cost relative to income. A household is considered rent-burdened if it pays more than 30% of total household income in rent. Beyond 30% of household income, rent is considered a burden.

Councilmember Wunderlich on October 11, 2018 suggested a ‘qualified subset’ of rent-stabilized households could receive city money to offset the maximum allowed annual rent increase. Were the city to kick-in 2% of the rent increase for the bottom quintile (one-fifth) of households according to the amount of the rent, then it would cost the city only $900,000 annually to cushion the impact of each annual rent increase for those households.

To get that $900,000 figure he totaled the aggregate annual rent paid by the bottom quintile — $45 million — and then calculated 2% of that annual which would be the subsidy that could shave two percentage points off of the annual rent increase. For example if the rent increase is 4% then the subsidy could defray half of the rent increase (2%) for eligible households.

Councilmembers generally agreed with the concept although councilmember Julian Gold cautioned, “This city has never created subsidies, and I’d like to talk about the impact of the subsidies on city’s financial health going forward.”

At the second rent stabilization ordinance study session on October 18, 2018, councilmembers remained supportive. Though Gold again stated his concerns: “The biggest issue for me is the continued financial health of the city,” he said. “I’d hate for us to be in a position where we are supporting X number of people with the rent” in an economic downturn.

At the third rent stabilization ordinance study session on November 20, 2018, the proposed subsidy came into sharper focus with the broad goal of protecting eligible households while ensuring that landlords have sufficient rent increases to be able to maintain the property. Wunderlich suggested the subsidy could be bounded by a fixed amount annually or indexed to business taxes collected from the landlords.

Yet to be established were eligibility criteria. That was the sticking point (and always has been). Wunderlich suggested some combination of rent amount, rent burden and minimum tenure requirement (such as three years). However agreement was elusive. Indeed when city council digs into rent stabilization particulars often the discussion quickly goes into the weeds.

When city council returned to the issue of rent stabilization in the evening of February 5, 2019, consensus still proved elusive. Not only with regard to the subsidy but to all unresolved rent stabilization ordinance amendments. Per the meeting minutes:

Councilmembers agreed that the ordinance is not ready for adoption at this time and should be reviewed further for unintended/intended consequences, ambiguous language that should be cleaned up, and other considerations such as rent subsidy, Mills Act, habitability, an inspection program, and other remaining issues. — February 2, 2019 minutes

In fact the meeting was the council’s last word on the rent stabilization ordinance. Soon council established the rent stabilization commission and summarily handed-over to the inexperienced commissioners all of the unresolved rent stabilization issues. Like a hot potato. And the subsidy fell off the radar too. Until the pandemic.

Subsidy Round #1: Relief for Low-Income COVID-Affected Households

Councilmember Robert Wunderlich used the city’s annual budget meeting on June 29, 2020 to resurrect the subsidy. “I had asked that there be some money be set aside to ease the burden on renters and to provide money to landlords.” He wanted an appropriation to fund it and pointed to City of Los Angeles which was providing $1,000 monthly over a three-month period to qualified renting households.

A scaled-down that reflected our city’s much smaller population could cost $1 million. No appropriation made its way into the budget but staff agreed to return in July with a subsidy program framework.

Staff returned with subsidy options at the July 21, 2020 city council meeting. The program would focus on households financially impacted by COVID. The two program options on offer:

Provide $1,000 for three months for a total subsidy of $3,000 per household and that subsidy would be payable after the emergency is lifted
Provide a subsidy in the amount of rent owed to landlords that was delayed pursuant to the city moratorium — a subsidy that could cover from one to three months of back rent

There were only 148 rent-stabilized households that delayed the payment of rent using the city’s moratorium. That would suggest a very limited subsidy. Instead city council chose the first option and attempted to provide staff direction concerning how to define eligibility. Should it be a means test using household income? Should it be restricted only to lower-rent households?

Council agreed that any subsidy would be paid directly to landlords and protect COVID-affected tenants from eviction. Councilmembers even discussed making the subsidy a permanent program. Staff agreed to return with a program framework.

Staff returned to the September 15, 2020 city council meeting and, after fine-grained policy back-and-forth, council agreed on a framework. The subsidy would pay $1,000 per month for a maximum of three months to eligible households with eligibility criteria:

RSO households only (no single-family or condominium tenants);
Household income at or below 80% of area median income (AMI, which is the generally-accepted threshold for ‘low-income’);
Priority given to renting households that include a senior and families with children in BHUSD schools; and,
Tenants paying a rent of more than $4,000 were excluded.

Refer to the rent subsidy application packet for more information about what was asked of tenants. Council also imposed conditions on landlords. An eligible landlord must also not be in default on financial obligations or have an open code violation, for example. And this deal-breaker for some landlords: pledge not to evict a tenant until 12 months after the local pandemic emergency ends. (That date as subsequently established by city council is May 31, 2023.)

Having established a framework council needed a number. Bigger is better, they agreed. “We are all in favor of a million dollar number,” said Councilmember Les Friedman. As formally approved at the December 1, 2020 meeting the subsidy would provide the “million dollar number” benefit plus third-party administration costs for a grand total of $1,098,527. (See the Rent Subsidy Notice then posted online as well as the press release – one of the rare press releases that even refers to rent stabilization and renting households.)

Some of that money would come from from outside of the city: federal CARES Act and community development block grant money plus Los Angeles County’s Permanent Local Housing Allocation funds. That comprised about 50% and the city kicked-in the other half.

The rental subsidy was a long time coming. More than two years had elapsed between the time that city council discussed it in detail in October 2018 and the call for applications was posted in November of 2020. (The actual application period extended from November 16, 2020 through December 7, 2020.)

Subsidy Round #1 Results: Few Households Qualified

The first round of subsidies fell far short of city council’s goal: according to an update provided to city council in March of 2021 — ten weeks after the application window closed — only 21 applicants had received funding. Of the “million dollar number” only $63,000 was disbursed by March.

At the time of that update just 23% of reviewed applications were approved with 200 applications still pending. As many as 3-in-4 applicants were denied because they could not show COVID-related financial impact. Some had received unemployment or fixed-income benefits that were was unchanged by COVID; and some were disqualified for having already received payments through a county subsidy program. There were 23 applicants deemed ineligible because their landlord refused to agree not to evict them.

City council was not happy with the pace of application review.

Nevertheless the next time the public received a subsidy program update was at the August 2021 council meeting. The overall numbers (as of June) had not changed very much: only 99 (20%) of 520 total applications were approved and barely $300,000 was disbursed. That was not even one-third of the million-dollar pot. By the time the program wrapped there was still $700k left unspent. This table from the August 3, 2021 subsidy update shows the breakdown.

Relatively few applicants (4%) were denied for having too much income however some self-employed applicants thought they were unfairly denied because program used gross income (rather than net income after business deductions) for the means test.

More concerning, nearly 1-in–10 applicants were denied because the landlord refused to participate. Of those that participated, did any subsequently evict the tenant prior during the protected period? We don’t know. The city responded to a question about that by saying, “The city has not cross-referenced registry data for the subsidy rewards with the records from tenants who have reported being evicted.” Of course we knew that answer even before we asked the question.

With $700,000 of the $1M subsidy appropriation still to be disbursed there was council interest in a second-round subsidy but it was slow to come back for discussion.

Subsidy Round #2: ‘Housing Assistance’

City council returned to the subsidy at the March 15, 2022 council meeting where the focus shifted from rent owed and back to offsetting an anticipated higher rent increase for eligible households. That was a return to the earliest subsidy discussions in late 2018 where the subsidy was proposed to offset potentially large rent increases.

The focus also changed in part because circumstances had changed. The state ‘Housing is Key’ rent relief program had provided about 700 Beverly Hills households with $23k on average to pay rent arrears, so dealing with back rent wasn’t as much the priority. With a potentially large post-pandemic rent increase again looming, city council could use some political cover! Hence the subsidy round #2.

The name of the program changed to ‘housing assistance,’ which sounds imprecise but appears to nod to the dual objectives of the revised subsidy program: to cushion the impact of a rent increase on low-income households and to put money in landlord’s pockets.

“The City has approximately $700,000 available from the Rent Subsidy Program to administer the rent increase rental assistance program,” said the staff report for the March 15, 2022 meeting, which continued:

The City Council may consider allowing a means tested household, with priority given to seniors, disabled, and households with minor children in Beverly Hills Unified School District, an annual maximum subsidy of $3,000 paid out monthly. This would provide a tenant with a monthly $250 subsidy to assist in paying the increased rent resulting from the increased CPI and the phased in rent increases. At the rate of a $3,000 maximum subsidy, the City could assist approximately 200 households.

The questions posed to city council were familiar already. How to determine eligibility? Limit it to low-income or to very-low-income households? Limit the maximum subsidy to $3,000? Pay it monthly at $250 per month or an annual lump sum? How much to spend on it? City council consistently spoke in favor of a generous subsidy.

Often such council discussions get tied up in a knot. They show how unfamiliar is our own city council with the circumstances of renting households in Beverly Hills. And this discussion was no different. Councilmembers agreed that they didn’t have enough information to establish a round #2 subsidy program. However they did settle on a broad outline: all rent-stabilized households (not only COVID-affected households) could apply but eligibility would be limited to either very-low-income or low-income households. If the threshold was set at 80% of area median income or below, then the maximum aggregate subsidy payout could total as much as $2.4 million.

Soon the discussion turned to more pressing matters like when to end the local moratorium and what percentage rent increase should be allowed that July. And what about the next two rent increases in 2023 and 2024? So many unknowns! Councilmembers tentatively agreed that the moratorium would sunset on May 31st and the first post-pandemic rent increase would be limited to 3.1%. (For more about the increase refer to the city’s moratorium guidance update.)

Round #2 Housing Assistance: Recalibrate Your Expectations

Staff agreed to return in April with more information about household demographics so that council could properly scope a round #2 subsidy.

At the next relevant council meeting on April 26, 2022 the program was rechristened as the ‘housing assistance’ program. The stated purpose was to “assist tenants and housing providers with the anticipated inflationary conditions that may result in higher than typical rent increases.” The available funding was the leftover $700k from the round #1 subsidy.

The staff report offered several recommendations for a subsidy framework:

Limit eligibility to very-low-income households “in order to ensure that those most in need receive assistance while at the same time preserving sufficient funding levels for the program”;
Calculate the subsidy for each eligible household at 75% of the dollar cost of the rent increase for the one-year period starting on July 1, 2022 to June 30, 2023;
Limiting the subsidy to eligible households that occupy units with a monthly rent of $2,000 or less; and,
Give priority to ‘mom-and-pop’ landlords (defined as owning no more than 4 units provided that the landlord not be majority-owned or controlled by a corporation).

Although councilmembers had repeatedly supported a larger subsidy, the eligibility criteria were clearly intended to keep the program within the $700k in funds available.

For one thing it limited assistance to defraying part of the rent increase rather than pay some part of the base rent. By design that is help at the margin. Take for example an eligible household that pays $2,000 per month rent and is facing a 6% rent increase next July. As proposed the city assistance would pick up three-quarters (75%) of that dollar rent increase which amounts to only $30 a month. That’s a far cry from the $250 monthly subsidy discussed at earlier meetings.

Second, limiting the housing assistance to households that rent at $2,000 or below excludes three-quarters of all city renting households. Some may need that assistance. Households paying higher rents may well be rent-burdened and need a subsidy. Councilmember Gold has repeatedly sought to limit the subsidy to households with a lower rent.

Third, city council has never agreed on a definition of ‘mom-and-pop.’ Regardless of how frequently that term is invoked from the council dais, it is essentially meaningless because all apartment leasing operations are businesses and each is increasingly operated like a business. This criterion would exclude otherwise eligible households simply because they live in a 5-unit or larger building.

Indeed the objective was to keep the housing assistance program limited. As Helen Morales, former deputy director of the rent stabilization division, told council, “Staff believes the program cost is anticipated to roughly align with the funds on hand.” She was referring to the unspent $700k in funds from the round #1 subsidy. Ryan Gohlich Morales’s boss) agreed. “Our starting point was the existing budget. It’s not a perfect program but it fits within budget.”

Fairly or not we saw the invisible hand of Councilmember Julian Gold working to limit the scope of housing assistance. But councilmember Lili Bosse was pushing for a larger program. “I’m hearing we want to help those in need, as many as possible, and as quickly as possible.”

Again city council found difficulty marshaling agreement. The matter was referred for further discussion to an ad-hoc council committee comprised of councilmembers Robert Wunderlich, long the subsidy proponent, and councilmember Gold who has consistently advocated for cost controls on the subsidy program. Staff was suggested to poll landlords as to subsidy need which staff did.

From Committee to Council But No Action

Six weeks later on June 13, 2022 the ad-hoc committee met but councilmembers Wunderlich and Gold agreed that the informal poll of landlords provided insufficient data to frame the program. Another survey was agreed.

On October 19, 2022 the rent stabilization office provided landlords with a back rent subsidy survey. “You are receiving this notification because you are a landlord or housing provider within the City of Beverly Hills,” said the email with a link to the landlord survey. It continued:

The City of Beverly Hills recognizes the enormous impacts that the COVID–19 pandemic has had on all the City’s residents, including housing providers. In recognition of those impacts, the City is in the process of creating a subsidy program for housing providers who have suffered financial losses due to unpaid back rent from current and former tenants. As part of the process of creating this program, the City has designed a Back Rent Subsidy Form to be completed by housing providers who wish to be considered. Note that failure to complete the survey in its entirety will render a housing provider ineligible for any initial round of funding distributed by the City.

According to the landlord subsidy survey questionnaire provided to landlords in October, which we obtained through a records request, the city asked landlords to identify tenancies in rent arrears by unit number (no tenant names were solicited) and whether or not the tenant has vacated the unit. The survey also asked if the landlord had received any state rent relief on behalf of that tenant and whether the landlord had entered into a settlement agreement with the tenant. “How much rent is owed as a total sum for all delinquent units?”

Survey findings could be useful to our understanding of how the pandemic affected renting households and landlords. Unfortunately neither city council nor the public has seen a report on the survey’s findings.

The last time city council heard anything at all about the round #2 housing assistance program was a brief 2-page Housing Assistance Ad Hoc Committee Meeting Update June 21 2022 report presented to council on June 21, 2022 where there was no council discussion. “Staff will return to the Committee with a report on all requested information for further discussion and will return to the City Council in the future with further updates as appropriate,” said the staff report. That didn’t happen.

Future Housing Assistance? Magic 8-Ball is Cloudy

Not only has the focus of the subsidy program changed but perhaps so has the political will. We have seen no indication it is on any councilmember’s mind. Recently we reached out to the rent stabilization office to ask. The reply:

The program’s status is still pending. There are ongoing conversations about how the funds might be distributed, which the City hopes to move forward soon. There is no scheduled date for this item to be heard by the City Council at this point. Once the Division has a date on the calendar, staff will be sending notices to landlords and tenants to advise. — rent stabilization office

That doesn’t suggest a clear path ahead to housing assistance for either tenants or landlords. The Magic 8-Ball is cloudy! However looking ahead we can see the subsidy program either go away or come back soon for more discussion in the context of the next rent increase in July. What we see affecting any future subsidy:

Outgoing mayor Lili Bosse did not take the initiative to bring back to city council a discussion about the next round of subsidy. Perhaps her position on rent stabilization shifted; or maybe she recognized that the politics on the council dais have shifted away from supporting a subsidy.

Councilmember Julian Gold may not be interested in another subsidy. He has consistently sought to limit the subsidy program’s eligibility. Now he is our incoming mayor with the power to set the council’s agenda. Will he bring it forward?

Tenants are facing a potentially large rent increase starting this July and a subsidy could provide some political cover. The changed political balance on our city council may reward landlords this year with much larger percentage rent increases and the subsidy could be a way to deflect criticism however narrow is the eligibility criteria.

The pressure for a higher percentage rent increase is even greater today because council limited the size and reach of the post-pandemic rent increase last July. Tenants are likely to pay for that decision this July with or without the promised round #2 of housing assistance that never came. (For more information refer to the rent stabilization website.)

Our Take

Sometimes it seems impossible for our city council to agree on a program’s particulars no matter how worthy it may be. The subsidy is a good example. We looked back at dozens of council meetings to figure out where the proposed program faltered in discussions, how round 1 was ever approved, and how it again ran aground as recently as mid-2022. These discussion, the record shows, produced much more heat than light.

On one hand, the demographic data that city council sought is imprecise: the city doesn’t know household incomes. We can rely on the census, or look to state rent relief data, for a reflection of household incomes, but estimating rent burden accurately is more difficult because it requires a case-by-case calculation. Council struggled with appropriately scoping the program.

On the other hand city council talked to death the first and second-round subsidy programs despite council consensus to act fast and go big. In the end, the only subsidy approved in late 2020 was neither big nor fast. Our city would have done better to look at a neighboring jurisdiction and adopted their program.

Ultimately there isn’t much difference among tenants and landlords across our area. Too many renting households are in need of assistance and too many landlords complain they can’t afford to maintain their properties without a big rent increase. We know that’s not true. Will landlord persuade council to give it to them this July?

(Pictured at top: Helen Morales, the former deputy director of the rent stabilization division, presents the second-round subsidy to city council.)